IN RE: REPOSITORY TECHNOLOGIES, INC

The Third Circuit Court of Appeals dealt a blow to secured creditors in its recent decision holding that a debtor may prohibit a lender from credit bidding on its collateral in connection with a sale of assets under a plan of reorganization. In the case of In re Philadelphia Newspapers, LLC, No. 09-4266 (3d Cir. Mar. 22, 2010), the court, in a 2-1 decision, determined that a plan that provides secured lenders with the “indubitable equivalent” of their secured interest in an asset is not required to permit credit bidding when that asset is sold.

What should be the remedy when a bankruptcy court holds that a security interest is avoidable as a preferential transfer, but the value of the security interest is not readily ascertainable? The Ninth Circuit recently addressed this issue in USAA Federal Savings Bank v. Thacker (In re: Taylors), 2010 U.S. App. LEXIS 5793 (9th Cir. 2010). The Court held that, since the value of the security interest was not readily ascertainable, the only available remedy is for the bankruptcy court to return the security interest itself, not its value, to the bankruptcy estate.

On April 20, the House Committee on Financial Services held a hearing to discuss public policy issues raised by last month’s report of court-appointed bankruptcy examiner for Lehman Brothers Holdings Inc. (Lehman Brothers), Mr. Anton R. Valukas. The Committee heard testimony from the following witnesses:

Panel One:

Friday, the Illinois Department of Financial and Professional Regulation, Division of Banking closed Lincoln Park Savings Bank, headquartered in Chicago, Illinois, and the FDIC was appointed receiver.

Friday, the Illinois Department of Financial and Professional Regulation, Division of Banking closed Wheatland Bank, headquartered in Naperville, Illinois, and the FDIC was appointed receiver.

IN RE: ALTHEIMER & GRAY (April 15, 2010)

On April 26th, the Eleventh Circuit held that the anti-injunction provision of the Financial Institutions Reform, Recovery and Enforcement Act prohibits a federal district court from enjoining the FDIC. A trial court had initially imposed a TRO against a failing bank prohibiting it from taking any action with respect to $1 billion worth of mortgage proceeds it held in trust for petitioner, Bank of America, who held legal title. When the FDIC was appointed receiver, the FDIC moved to dissolve the TRO. The trial court refused converting the TRO into a preliminary injunction.

This case and its companion cases involved contentious construction disputes surrounding the interplay of the Massachusetts Mechanics' Lien Statute in the context of a bankrupt general contractor and a building owner’s claims for offset damages. In this instance, the dispute centered on the fact that a contractor’s bankruptcy filing left approximately 28 subcontractors unpaid for work they had already performed.

Yesterday, the Washington Department of Financial Institutions closed Frontier Bank, headquartered in Everett, Washington, and appointed the FDIC receiver.